Thursday, April 18, 2013

What Is The Difference Between Free-Market Capitalism and Crony Capitalism

The other day an acquaintance mentioned that he believed capitalism was a
good socio-economic model, but also felt as if it was too easily abused by
greedy entrepreneurs and industrial capitalists the way it is currently
practiced and therefore didn’t make sense as it tended to push people down.
Well, I understand where these thoughts are coming from, mostly from socialist
propaganda, but the reality is that just isn’t the case. When he speaks of “how
capitalism is practiced currently” well, he is looking at crony capitalism,
certainly not free-market capitalism theory. Okay so, let’s talk shall we?

Now then, as a capitalist, I’ve noted in this country that most of the
problems come from the manipulation of capitalism, and crony capitalism
exploits, so I’d blame the less-than-ethical politicians and uninformed politic
for allowing that. Of course, we hardly teach economics in our schools in the
US anymore, and most people here anyway can’t balance a check book which is
probably okay because everyone is living off future earnings, and paying
interest on credit cards to do it and the rest is ATM cash accounting, which
anyone can understand as the money is taken out of their accounts in real-time,
and they can check their balances on their iPhones at will.

Okay so back to argument that “it’s not being practiced correctly,”
capitalism that is, and that it should benefit everyone, not just greedy
business people. You see, it does indeed benefit everyone, it delivers us
everything we have you see, surely we all benefit from abundance right? Ever
been to a third world nation, not a lot happening, why? They don’t have an
economic system set up the way we do.

You see, Capitalism (yes with a capital “C” as it should be) is not to be
used or have its production, credit, capital, or labor controlled or hijacked,
but rather to solve all the problems by allowing producers to produce based on
the demands of the buyers. If something is very important to someone else,
intrinsically, that person is willing to pay more, then if the entrepreneur is
making more, then other producers and entrepreneurs will move over to get in on
the game, thus, more competition lowers the price, thus, the lowest price and
most efficient producers continue.

But when we artificially screw with price controls, production limits,
tariffs, mandatory labor costs, free grants, credit, tax gifts, etc. we throw
the “free-market” laissez faire benefits out the window, then it is
inefficient, and doesn’t work, but if we hadn’t screwed with it, it wouldn’t
have broken. If we over regulate one industry, not another, we unbalance the
choices, prices, and are asking for corruption, manipulation, and incestuous
relationships between big business and big government and when we do it’s our
fault for doing so, not the free-market system, which gets blamed.

Indeed, let’s not confuse crony capitalism or that incestuous relationship
that Adam Smith warned us about, with what free-market capitalism is. Indeed, I
hope you will please consider all this and think on it.